Diesel engines are more efficient than gasoline engines. For nearly 50 years, if auto manufacturers needed a model that would knock the socks off consumers or government regulators who were focused first and foremost on fuel economy, bolting in a diesel engine was the way to go. Unfortunately, in addition to being economical, diesel engines also tend to spew out lots of nasty stuff like nitrogen oxides and micro-particulates that are health hazards.

Diesels became something like a religion in Europe. While never that popular in North America, they have found their way into certain pickup trucks and large SUVs in order to boost the mile per gallon numbers on their window stickers. Higher mpg often means higher sales. Simple as that. Fiat Chrysler rode the diesel hobby horse as hard as it could the past few years in search of more sales for its Ram pickup trucks and Grand Cherokee SUVs. And it worked. Chrysler was able to advertise the diesel-powered Ram 1500 as the light duty pickup truck with the highest EPA fuel economy in America. Sales shot up. Ford rushed diesel-powered F-150s into production to compete.

But heightened scrutiny of diesel emissions in the wake of the Volkswagen diesel cheating scandal led federal and state regulators to take a closer look at the turbo-diesel engines Fiat Chrysler was using. They found they had higher emissions in real world driving than they did in government tests, and sued Fiat Chrysler last May.

According to reports, Fiat has been one of the worst cheaters in the European market. Where others jumped through hoops to program their diesel emissions controls to shut themselves off when emissions testing was not underway, Fiat allegedly gamed the system in a much simpler fashion. Since the emissions test protocol lasted 20 minutes, it simply added a digital clock to its software that deactivated the emissions controls after 26 minutes. Easy peasy.

Now lawyers for the EPA and CARB have notified the company they are prepared to settle the civil suits filed against Fiat Chrysler as a result of its alleged diesel emissions violations. The legal eagles sent a letter dated January 27 to company attorneys advising them that any settlement “must include very substantial civil penalties” large enough to deter future violations and that “adequately reflect the seriousness of the conduct that led to these violations,” according to Bloomberg, which has obtained a copy of the letter.

In addition, the company must retrofit the 104,000 affected vehicles affected to bring them into compliance with all applicable regulations and take steps to insure compliance in the future. Unlike the Volkswagen settlement, the current demand does not require a buy-back of the affected vehicles by the manufacturer.

Mary Nichols, chair of the California Air Resources Board, tells Bloomberg, “We are engaging in conversations but I’m not involved in the settlement talks.” Then she added, “It’s interesting that Fiat Chrysler has the same team of lawyers representing them that worked with VW.” Certain law firms have made lucrative careers out of representing liars and cheaters. Many of the same firms that represented the tobacco industry 30 years ago are now representing fossil fuel companies. For more on this topic, see the movie Merchants of Doubt.

Estimates of what it will cost Fiat Chrysler to settle the civil suits pending against it range from about $400 million to $1 billion. Volkswagen agreed to a civil penalty of just over $4 billion, but its actions covered a longer period of time and almost 500,000 vehicles. Fiat Chrysler stock closed down 7.5% after the Bloomberg story was published.

FCA CEO Sergio Marchionne has taken the whole thing in his typically combative style. He claimed to be outraged when the EPA first filed a notice of violation against the company last year. Marchionne termed the allegations “unadulterated hogwash.” But Justice Department lawyers insist they have “compelling evidence” that Fiat Chrysler knew or should have known its engines did not comply with emissions standards. They go so far as to term what the company did as “egregious.” That makes it sound like they have the proverbial “smoking gun” tucked away in their briefcases in the event the civil claims ever go to trial.

It should be noted that all this legal maneuvering only concerns civil penalties. The company is still the target of a criminal investigation in the US.

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